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Glossary
Nonfarm payroll NFP
Definition
Nonfarm payroll (NFP) is a key monthly indicator of the status of the US economy that is followed closely by traders and investors. NFP comes out, usually, every first Friday of the month at 8.30 ET. NFP is the number of jobs that were added in the US excluding certain sectors, such as farming.
The nonfarm payroll is an indicator of how the US economy is doing. Before NFP is released, there will be a consensus expectation of what the number will be among financial experts, analysts etc. If the NFP beats that expectation, it is generally perceived as a signal that the economy is stronger than expected. If the number is lower than expected it signals that the US economy may face tougher times.
Traders and investors tend to use the nonfarm payrolls as an indication of the US job market, which in turn can hint where the US economy is heading. Thus, it may signal movements in the US stock market as well as whether the American central bank, the Federal Reserve, will be more likely to make any policy changes, such as changing interest rates.
As the US economy is viewed as one of the most important and influential economies globally, the nonfarm payrolls gain attention across the globe.
Nonfarm payrolls are reported by the Bureau of Labor Statistics (BLS), which is a division under the Department of Labor. The US unemployment rate, the percentage of the US labor force, which is unemployed and is actively seeking jobs, is released by the BLS at the same time as the NFP.
As with any other financial key figures, neither the nonfarm payroll nor the unemployment rate should be used in a vacuum to make investment decisions. You should always consider a thorough analysis of the market as well as your portfolio, economy, and risk profile before you decide to enter into a trade.
Check out this guide to learn more about nonfarm payrolls and how to potentially integrate it into your investment strategy.